Euronav: Best VLCC eco-gains from retrofits, not newbuilds

OCTOBER 16, 2013 — Antwerp, Belgium, headquartered tanker giant Euronav (NYSE: EURN) reported a third quarter loss of $29 million, taking its year to date losses to $47 million. It says that though demand for oil is strong, the challenge to the market in the third quarter "was still entirely on the supply side as the market continued to be characterized by an oversupply of available tonnage."

"In order to rebalance the market, older tonnage needs to be scrapped, existing tonnage needs maintenance and no orders for newbuildings should be placed. Further consolidation of the market should be welcome," says Euronav.

Shunning newbuilds, Euronav is retrofitting all its ships with Mewis ducts

Euronav continues to claim that so-called "eco-ships" do not exist in the large tanker sector as most "eco gains" can be replicated through retrofitting fuel saving devices which can be done to existing ships at a fraction of the cost of a newbuilding.

Euronav notes that hull shape is critical in determining resistance but tankers optimise their carry capacity and freight earning through having a very boxy shape (a high cross block coefficient) which unfortunately maximizes resistance. This cannot be significantly modified without losing freight (earning) capacity. This is quite different from containerships.

In addition to slow steaming, there are a number of other fuel savings techniques available. For example, a ship with an electric heavy fuel heater can switch off its boiler when slow steaming or drifting and this can save 5-6 tonnes per day (US$3,000 to US$3,600) which, says Euronav, is "as much as the savings claimed for new ships (so-called Eco) over old ships in reduced sailing consumption. Yet, this retrofit costs no more than $30,000 and can be installed by the ship's crew, a payback period of less than 10 days waiting time."

Propulsion comes not only from the main engine but from the flow of water over the propeller and, says Euronav, the single most effective measure to enhance this is to retrofit a Mewis duct. Euronav has demonstrated that the installation of a Mewis duct results in savings ofbetween 10 % on one class of VLCC to 7% on another class of Suezmax. The cost of this retrofit, which takes place in dry dock is less than $500,000: a payback period of less than half a year, Euronav will retrofit its entire fleet, as will two other shipowners it knows of amounting in total to 40 retrofitted VLCCs.

Euronav has produced a report on retrofit savings vs. "eco-ship" claims that is available HERE